WASHINGTON: US consumer confidence surged to near an 18-year high in August, as households remained upbeat on the labour market, pointing to strong consumer spending that should help to sustain the economy for the remainder of the year. The bright economic outlook, however, was dimmed somewhat by other data on Tuesday showing the goods trade deficit widened sharply in July as exports of agricultural products tumbled, indicating trade could be a drag on growth in the third quarter.
The jump in confidence this month suggests consumers are little worried about the Trump administration’s protectionist trade policy, which has led to an escalation of a trade war between the United States and China as well as tit-for-tat tariffs with the European Union, Canada and Mexico.
Economists have warned that the duties on imports will raise prices for ordinary Americans as well as make raw materials more expensive for some manufacturers. There have been reports of some companies either laying off workers or planning to as a result of the import tariffs.
“That suggests a degree of skepticism about trade, inflation, or anything else knocking the economy off track,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan. “For now, consumers remain resiliently positive, which bodes well for household spending in the coming months.”
The Conference Board said its consumer confidence index jumped 5.5 points to 133.4 this month, the highest reading since October 2000. Consumers’ assessment of both current business and labour market conditions improved further in August.
Many consumers said they planned to buy a house or other big-ticket items in the months ahead. The survey’s so-called labour market differential, derived from data about respondents who think jobs are hard to get and those who think jobs are plentiful, rose to 30.0 in August from 28.0 in the prior month.
That measure closely correlates to the unemployment rate in the Labor Department’s employment report. It is consistent with continued reduction in slack in the labour market, which is near full employment. Consumers’ near-term inflation expectations moderated this month from July.
The Conference Board survey’s findings are in stark contrast with a University of Michigan survey showing consumer sentiment falling to an 11-month low in early August as households worried about rising inflation eating into their modest wage increases and eroding their purchasing power.
Economists attributed the divergence between the two surveys on their treatment of the labour market. — Reuters
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